Lease Deals pro/con?

bth9461 · Lease Deals pro/con?

Thinking of adding a second truck on. If you have been on either side of the lease deal I would be interested in what you thought was a fare deal for the O/O. Just looking for idea's, I want to make the guy a fare offer. Thinking in terms of a percentage of the Gross, what are other lease deals giving, milage rates or percentage of the gross. The freight would be LTL's and cars mostly. What expenses should I expect to cover.

Brian

Stroker

Do you know this person you are going to be placing in the truck.????

bth9461

Hey Stroker,I have known him for about 12 years. He has actually ran a business for me before. I used to own a Paintball field years ago and the last year we were open he ran the business for me. Paintball is a very high liability type of operation. The guy is very trustworthy. I am only considering this because of the type of person he is. If this works I will be adding his brother also down the road. They worked together on running my Paintball business. It takes quality people to build something special, and both of these guys are AAA+++ guys. Just starting to gather figures, I think he will have to run heavier than I am to make it work. Thinking medium duty with a long trailer.

Brian

D. Green

Brian, the average down here is 60-65% for a straight truck, and 70-75% for a truck/trailer combo.

Many start at the low end, and will give "percentage" raises as incentives.

On the expenses side, they'll need to be insured/insurable by your insurance company, you must have them drug tested, keep driver/vehicle files, etc. You can deduct the cost of insurance from their settlements.

Hope Rose will chime in, as she had written a good response to a question about hiring drivers....

bth9461

What about the timing on the carrier settlements. Most of my regular customers are now paying in 1-2 weeks, I have quit hauling for my #1 account that was 40-45 days out, that has helped my cash flow a lot. I do have some good customers that take 30 days to 3 weeks to pay though. Is carrier settlement handled traditionally faster than the cash flow of the customer base? Many brokers will not pay until they are payed. I remeber how hard it was starting out, cash flow is so important especially when a guy is first starting. I have had very little bad debt only $400 on 200k gross.

Brian

D. Green

Brian, check out the lease reg's:

http://www.fmcsa.dot.gov/rules-re.../fmcsrruletext.asp?section=376.12

(f) Payment period — The lease shall specify that payment to the lessor shall be made within 15 days after submission of the necessary delivery documents and other paperwork concerning a trip in the service of the authorized carrier....

much more at the site. FMCSA governs how lease trucks are to be paid, but not how Companies are to be paid from their customers. It can be a cash flow problem for the company, at times.

bth9461

Seems like I have a lot of home work to do. Thanks Dennis.

Brian

bth9461

Met with my buddies the other day, this looks like it could fly in the Spring. They both plan on coming on board at the same time and driving as a team. I like this because the older brother has 25 years OTR with class 8's. They have been looking at a new class 7 FL with full air ride and a sleeper. I suggested to protect them incase I fail to get a good used class 8 with a step deck. So they have some other lease options. I don't plan to fail, just thought the used class would give them more options. I plan to build multi LTL's going out and if they buy the bigger rig I can get a decent full load rate coming back. I think it will be easier to get them home each week with a decent gross.

This is what I would do if I could start over and had the money to do it right. I am seeing more AIR RIDE loads and some no HOT SHOTs, though I think these are design to weed out the dually guys (not the class 6-7's). All of my main customers have been fine with my equipment though. I like the Idea of grabbing 1 full load and heading for home at the end of the week, instead of loading 2-3 seperate cars for low rates.

So i am waiting to see what they want to do, but it is looking good.

Brian

bth9461

Met today with my potential lease Team again. Things are looking good, we are now pulling together figures for an estimated cost PM for them to run. Then i have to give them an estimate on what I think the truck will do income wise.

They have changed their minds on running a BIGSHOT though. They are going for a Full size class 8 and a 53' Stepdeck with some type of easy vehicle loading. Maybe a Hydraulic Beaver tail similar to my GN. Target date is Mid June to get rolling.

I plan to run different for them, than I do. I run so many loads and short miles to the East Coast, that works for a single driver. To many picks/drops have 7-3 hours that I think if I send them on one of my runs it will cause them to stop and waite to load/unload, instead of running the roads.

Please comment:

This is what I am thinking, Full loads with some of my light weight freight on the upper deck when the space is available. Then look for loads that are 800-1600 miles out. I am thinking of these lanes.

MI to Tx, and then back to MI,OH,IN, IL. Or MI to AL,GA,SC,NC, and then back to the Great lakes states. Or shuttle from TX to the SE states, or SE to TX, then back to the Great lake states. Either make a Triangle run , or 2 out and back runs per week. I can also do some short haul stuff between Detroit/Cleveland/Chicago to fill some miles each week if needed. I believe I can get them home every weekend. The full load capacity looks like it will give me lots of load choices to reduce DH miles.

I think I need to get them loaded with some miles to run to make the team work well, many multi stops like I do does not seem to be a good bet for them, in my opinion.

I also think that once we get going I will find some permanent customers, just like I have with my HotShot/LTL business. I have 4 Full load Direct customers identified, but the freight will run in several directions. So they are not likely to provide permanent longterm business. I would really like to find a dedicated run for these guys. I think it might be possible to do with a Team, seems to me a Team would be real marketable to a MFG some where. What do you guys think.

Also the tenative offer to the Team is 85% on line haul, and 100% of extra's (tarp,FSC,ect.). They pick up all expenses except Cargo/Liability INS. Most % deals seem to offer about 70/75%, but the big companies pick up some misc expenses. I think they will be more profitable though with a higher percentage and thats the best I can do. I expect this truck to gross 400-500k per year. You can buy a lot of perks with an extra 50k per year.

Lofty goals but I think it can be done, I hope these guys will be my corner stone of a premium O/O operation. I plan to run this company with a very lean overhead and keep as much revenue in the O/O's pocket, because without them, I have nothing, but my single truck.

This whole thing is dependent on these 2 guys I have known them for a long time, and feel comfortable about sticking my neck out with them.

Please comment?

Brian

LBZ

Ahhh so you like only sleeping two hours a week? Just kidding, but be careful of how much of a workload and stress you put on yourself to get this done as you already have a pretty heavy commitment and could easily throw another 20 hours to this side. It can be done, just saying be careful.

I haven't a clue where to begin with running a second truck, but my only thought is that if you start paying them at 85%, you have nowhere to take them up to in another year or so. What I am saying is that after they get better, iron out whatever kinks, they would have zero incentive to keep wanting to do better because realistically, there isn't much more money to give.
Just a thought & I may be completely off base...

bth9461

Hey Brad I am more worried about me getting better and working the Kinks out.

These guys are paying cash for their trailer 30k+ and financing a new - 2 year old truck. Were talking like 100-175k worth of equipment. I am not worried about their work ethic, they have all the insentive in the world to do well and get better. Thats what I like about working with O/O's over drivers. They have plenty of incentive to make sure things go right.

The 85% also represents a Team operation, I think I might need to look at a different figure for a solo, but that is not in the cards yet. If this works I might invite some new O/O's in. But This might not go beyond them or I might go back to just me.

As for time well, no pain - no gain. We will know soon enough if it is going to fly. My Wife will be off for the Summer, so that will help with the long hours. If things are going well, I will start to backoff on driving myself. Also for the past several months my business is mostly with the same customers going out, so my driving issues seem a little easier. The new trailer is making things much easier. I have 3 of my regular customers loaded on it now. I could not do that with the other Trailer.

Brian